Steal This Blog!

I think I’m done whining about the tax holiday nonsense.  I just wish it didn’t get so much exposure.  If it’s a bad idea, the news outlets should have some experts on, talking about how bad it is.  Instead, they just say that McCain and Clinton want the holiday, and Obama doesn’t.  No real depth, no understanding.  To the common observer, it probably seems like Obama doesn’t like common people.  The general consensus (according to the CNN morning show, anyways) seems to be that Obama is losing that “average Joe” vote to Clinton and McCain, which I believe is purely a reflection of the portrayal of him in the media.

Now, someone who isn’t getting a break from the TV is a fellow named Marc Dann.  He’s the Attorney General of Ohio.  He was elected over Betty Montgomery, a career politician who has held just about every state office you can hold and still be a dullard.  She’s been in office for ages, and I think it’s time for her to get a real job.  But I digress.  Mr. Dann immediately established himself as a defender of consumer rights, cracking down on mortgage companies and strictly enforcing a number of laws that have been kind of squishy on the books for a while.  He should have turned out as a great AG.  Unfortunately, like many politicians, he can’t keep his libido to himself.

In the last few weeks, a number of his underlings have been fired over an office sexual harassment case, wherein it was discovered that Dann was present at, or at least aware of, both listed events.  Then it comes out that he’s been having an extra-marital affair with another underling.  The Ohio Dems are pretty much calling for his head at this point, and the governor has said that if Dann doesn’t step down, he’ll endorse impeachment proceedings.  Did I mention that Dann is a democrat, as well?

It’s disconcerting because here’s another apparent example of a guy who gets into a position of power and can’t help but abuse it.  Just a little.   Eliot Spitzer was the reason I went to law school.  Now, he’s kind of a footnote in history, an adulterer and liar.  Dann didn’t personally do anything illegal (that we know of), but he’s failed in the Clark Kent persona we require of our politicians these days, and he failed spectacularly.  Adultery isn’t that bad a thing, in most people’s estimation, but it does smack of dishonesty.  He had to be hiding it from his wife, right?  Does that mean he has the traits of a person who hides important facts?  What else is he hiding?

In the legal profession, he could be disbarred for that.  Dishonesty, even legal dishonesty such as cheating at games of solitaire, can be a grounds for disbarment.  Lawyers have a lot of power in society, and we police ourselves.  If a guy is a habitual liar, constantly telling stories about how he met several famous celebrities in bars in Italy, he is at risk of being blackballed by the legal profession.  We just don’t want to take the risk of the general public having actual proof that lawyers are liars.  Lawyers should know better.  We’re trained to seek truth, to tear apart arguments, to evaluate statements.  We are supposed to be good at getting to the bottom of things.  So why do so many of these men delude themselves and play fast and loose with the rules?

Marc Dann may be right, and he may have done nothing to impugn his ability to act as AG, but I don’t know if I trust him.  I don’t know if anyone should.

The idea of a ‘tax holiday,’ giving relief from the $0.18/gallon federal tax on gasoline is not getting great press.  CNN conducted a poll on its website–highly scientific, I know–showing that 73% of those voting think that the plan is simply political pandering.  PANDERING.  I have to applaud the vocabulary there.

Here’s something that kind of drives me up the wall, and it shows how stupid politicians and the media think we are: Clinton’s plan to fund a tax holiday is to penalize the oil companies that are reaping record profits.  This was in response, I think, to Shell reporting something like $8 billion in profits last quarter.  It’s a bewildering number.  I don’t think anyone can really wrap their brains around what eight billion of anything is.  It’s just a huge number.  It is so big that we only really measure money with it.  I couldn’t find an instance of eight billion anythings on Google (except bushels of grain over several years) except dollars.  Google even thought I was looking for millions instead of billions of ‘pieces’ because it’s just too big.

So here’s the problem:  oil companies appear to be making ridiculous amounts of money off of us poor, working people who dump half our paychecks into our gas tanks.  Hillary Clinton says, let’s take some of that money and give it back to the people!  It’s a bad idea and here’s why:

First off, despite Google not believing me when I asked, $8 billion is not that much, when you consider the context.  Dutch Royal Shell of America has operating capital of around $114 billion per fiscal quarter.  It just costs that much to run the business.  It reported $8 billion in profits, which is about 7%.  For any company in the world, that’s a decent return.  In fact, most multinational corporations make between 6-10% profits every quarter.  If you’re not doing that, it’s time to merge and fire all the middle management.  In the words of the Shell CEO on CNN last week, “no other industry would be criticized for 7% profits.”

Second, penalizing the oil companies would not necessarily limit the cost of gasoline.  Corporations have a duty of loyalty and care to their shareholders’ bottom line, meaning… they have to make up that money somewhere.  Let’s say a gas tax holiday would drop the price of fuel a solid $0.15 from it’s current $3.61/gallon for three months (one fiscal quarter).  According to some simple math, the United States was consuming approximately 400 million gallons of gas per day.  That would cost the oil industry a total of about $5.4 billion.  Why, that’s not even the total profits from one company’s quarterly profit!  Surely they can afford to subsidize that?

Well, no.  I mean, yes–they can afford to do it, but it’s not their responsibility.  Our culture has dedicated itself to the free market economy, and in order for it to work we really do have to let it work its own way out.  If the government is going to tell these companies what they can and cannot charge for fuel, they start to tamper with the way the market works.  Oil companies are no longer free to spend their profits how they wish, will not be able to invest in new markets or research at the same rate, will likely not hire new people or increase the wages of any of its workers.  If the US government steps in and controls their profit making ability once, it may happen again.  Investors will start to pull their resources from these companies and will destabilize the entire economy worse than it is now.  It’ll be the end of the world.

The oil companies aren’t that stupid, though… they’ll just raise their prices to offset the cost of the penalty.  After all, they have a duty to their investors…

That argument seems a little flamboyant, but it’s true.  If our government were to start micro-managing the economy in such a way, it would undermine the entire system and smack of socialism.  And I don’t mean the happy socialism that exists in Sweden, I mean the bad, nasty socialism where there’s no toilet paper anymore.

McCain should stand for lowering taxes, but his plan is flawed because that’s a lot of money the government needs to operate, fix roads, pay border patrol, and so on.  Clinton’s plan is flawed because it is either ineffective or highly dangerous.  Obama says that no tax holiday is a good one, “there are better ways to cut fuel consumption and control the price of gas.”

Fiscally, this should be eye-opening for critics of Obama, as his policy is rather extremely fiscally conservative: Let the market sort it out.  If we want to control the price of gas, the government can encourage people to buy more efficient cars and offer grants for researching and developing alternative fuels.  We can let the dinosaur industry maintain itself, and when it becomes a totally useless hulk, the market will abandon it for a better idea.  In the meantime, let the evil oil companies have their profits, and if they’re smart they’ll spend some of it designing efficient batteries for electric vehicles, developing air, water, and geothermal power, and raising their workers’ wages (so they can afford to drive to work).

So, don’t be misled by the big numbers.  Change your perspective and think about it in context.  It is only seven percent.

This week, the national average for a gallon of regular unleaded gasoline is about $3.62, according to CNN. It’s hurting a lot of people who commute vast distances to work, or whose livelihoods rely on transportation. The Columbus and Cleveland areas are just sprawls of suburbs and bedroom communities, all pumped up as the nice, quiet places to live when the housing market was good and gas prices generally reasonable. Now, probably millions of people in Ohio are watching their pennies evaporate as they fill up every week. It hurts to watch $45 go into my Ford Focus, let me tell you. I remember when I could fill up for about $21.

I can’t remember which one started it. I think I heard about McCain’s plan first. It was the federal gas tax ‘holiday.’ Temporarily suspend the $0.18/gal federal tax on fuel, and people will feel the pinch a little less, at least for a few months. Then Clinton jumped on it, offering her own gas tax holiday, but this one would be funded by a ‘windfall profits tax’ on the oil companies that are reporting record profits for the last few years. Obama opposed any kind of holiday, as it wouldn’t solve the problem one bit. I tend to agree.

There are a lot of issues tied up in this tax holiday nonsense. The first one is that it is clearly just a ploy to get attention and votes. People are stressed by high fuel prices? Cut them a little break. Sounds good, right?  I disagree.  It’s a flawed strategy and in the end it won’t get anyone anywhere.  It is the pinnacle of short-term thinking and if people fall for it, they’re going to suffer quite a bit more later.

Let’s just look at the mechanics of how the tax holiday works.  Right now, in Mount Vernon, gas is $3.65 / gallon for regular unleaded.  The tax holiday, as proposed by McCain or Clinton, if it started today, would last at most four months.  So the price, today, would drop to about $3.47 / gallon.  Meanwhile, the price of oil is still going up.  The president of OPEC mentioned that $200 / barrel is not unrealistic by the end of the YEAR.  That would cause gas to steadily increase during the four months of the holiday.  Let’s be conservative and say that the increase would only be about $1.00 / gal (about 31% of the current cost of oil, with approximately $2.98 of oil / gallon), putting gas up to $4.47 / gal by the end of summer.  Then, when the tax holiday ends, it shoots up another $0.18 immediately.  Ouch.  We’re already plagued by the mindless fluctuations of the market, why not throw a governmental monkeywrench in it, as well?

NEXT: The Numbers Game

Just as I’m starting to get established in Mount Vernon, the federal government goes and sends me these tantalizing papers for a job in NYC with the Department of Homeland Security.  It could be a great paying job or only a decent one, but it would pay 3x what I make now, even at the low end.  The only real problem with the job, and this is the killer, is that I’d have to live in New York… hundreds of miles from my wife and my dogs.  And that sucks.

At the same time it’s just thrilling to have the potential of living and working in NYC.  We’ll see how it all turns out.  I’ve got a phone interview in the next week or so.